Articles Tagged withCitigroup

According to BrokerCheck records financial advisor James Allen (Allen), now associated with David A. Noyes & Company (David Noyes), has been subject to seven customer complaints and one employment termination for cause. According to records kept by The Financial Industry Regulatory Authority (FINRA) Allen has been accused by customers of unsuitable investment advice, breach of fiduciary duty, fraud, and negligence among other claims. The most recent complaint filed in April 2017.

In addition, Citigroup Global Markets Inc. (Citigroup) allowed Allen to resign in April 2017 after the firm made allegations that Allen was investigated for violations of the firm’s policies on communications with clients, and three inaccurate client profiles.

Our investment attorneys are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against financial advisor Cary Kievman (Kievman) alleging unsuitable investments and over concentrated positions among other claims. According to brokercheck records Kievman has been subject to five customer complaints.

In August 2016 a customer filed a complaint involving Kievman alleging that from April 2013-October 2014, and from September 2015-December 2016, respondent recommended unsuitable short-term equities, over-concentrated the account in equities, and that he did not receive advice regarding his 2015 required minimum distribution which caused him to miss the RMD and suffer a penalty of $6,000. The claim is current pending.

In a complaint filed in March 2016, a customer alleged that Kievman recommended unsuitable investments that were over-concentrated and did not code her risk tolerance correctly or fully disclose the risks of the investments. The customer is claiming $143,394 in damages. The claim is currently pending.

The investment fraud lawyers of Gana LLP are investigating the employment termination filed with The Financial Industry Regulatory Authority (FINRA) by Morgan Stanley involving broker Jamie Aguilar (Aguilar) out of the firm’s San Diego, California office. According to BrokerCheck records Aguilar has been subject to three customer complaints.

According to Morgan Stanley, the firm terminated Aguilar in May 2016 after alleging his conduct included an outside financial transaction between the financial advisor and a client of the firm that was not disclosed to the firm. The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.

At this time it is unclear the nature and scope of Aguilar’s private securities transactions. However, according to brokercheck records, Aguilar has disclosed OBAs listed as including Events Magnificent, Inc. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate brokers, or insurance agents to clients of those side practices.

Brokers often pitch structured products as providing “downside protection” against losses to a related index while allowing modest up side gain potential. However, today investors are waking up to the fact that structured products linked to the oil market are offering no protection. According to Bloomberg, retail structured notes meant to protect against a drop in crude failed to do so. Of the $437.1 million in oil related structured products that have matured this year, 44 percent, or $194.3 million of principal has been lost. The largest deal in the oil space is a $104.6 million Barclays issuance in April 2014 that has lost 42 percent of its value.

Indeed, Bloomberg found that all but three of the 39 notes examined protected against a certain percentage of losses, typically in the range of 10 percent to 20 percent. These notes quickly breached these loss limits as crude oil prices have declined more than 60 percent. Once the securities breached the “soft barriers” investors became exposed to the full loss at maturity and the value of the notes became wholly dependent on the change in oil prices.

The 14-month Barclays notes issued on April 11, 2014, occurred when a barrel of crude cost $103.74. The notes promised to pay 7.2 percent at maturity as long as oil did not drop more than 20 percent. If oil drops, the investor picks up the tab. When structured notes matured on June 22, oil was trading around $60 a barrel and the investment returned only $60.9 million of principal to investors.

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Matthew Giannone (Giannone) has been the subject of at least 6 customer complaints. The customer complaints against Giannone allege securities law violations that claim churning and excessive trading, unsuitable investments, unauthorized trading, fraud, misrepresentations, and inappropriate loans among other claims. The most recent claim filed against Giannone claims $1,200,000 in damages due to churning and an inappropriate loan. The complaint was denied and closed.

Churning is investment trading activity in the client’s account that serves no reasonable purpose for the investor and is transacted solely to profit the broker. The elements to establish a churning claim, which is considered a species of securities fraud, are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

The Financial Industry Regulatory Authority (FINRA) sanctioned broker James Madden (Madden) (Case No. 2014040336501) alleging that from March 2010, to February 2014, Madden exercised discretion in executing transactions in the accounts of l5 customers. FINRA found that Madden had received prior verbal authorization from his customers for the transactions but exercised his discretion in executing those transactions on future dates. FINRA found that Madden did not obtain written authorization from his customers to exercise discretion in their accounts and his brokerage firm, Raymond James & Associates, Inc. (Raymond James) did not approve the accounts for discretionary trading.

According to the BrokerCheck records kept by FINRA Madden has been the subject of at least three customer complaints, one regulatory action, and one employment termination for cause. Customers have filed complaints against Madden alleging securities law violations including that the broker made unsuitable investments and unauthorized trades among other claims.

Madden entered the securities industry in 1983. From 1993, until April 2009, Madden was associated with Citigroup Global Markets Inc. Thereafter, from March 2009, until February 2014, Madden was a registered representative with Raymond James. In February 2014, Raymond James filed a Form U5 stating that Madden’s termination was for cause and due to allegations of unauthorized trading. Finally, since February 2014, Madden has been associated with Thurston, Springer, Miller, Herd & Titak, Inc.

Advisors are not allowed to engage in unauthorized trading. Such trading occurs when a broker sells securities without the prior authority from the investor. The broker must first discuss all trades with the investor before executing them under NYSE Rule 408(a) and FINRA Rules 2510(b). These rules explicitly prohibit brokers from making discretionary trades in a customers’ non-discretionary accounts. The SEC has also found that unauthorized trading to be fraudulent nature.

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Francine Frechter (Frechter) has been the subject of two customer complaints and one employment separation. The customer complaints against Frechter allege a number of securities law violations including that the broker made unsuitable investments, misrepresentations, and failure to follow instructions among other claims.

Advisers have an obligation to deal fairly with investors and that obligation includes making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its costs, benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.

The number of complaints and regulatory actions against Frechter is relatively large by industry standards. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. Brokers must disclose different types of events, not necessarily all of which are customer complaints. These disclosures can include IRS tax liens, judgments, and even criminal matters.

The Financial Industry Regulatory Authority (FINRA) sanctioned (Case No. 2013036262101) broker Sylvester King Jr. (King) concerning allegations that from July 2009, through November 2012, while King was registered Morgan Stanley Smith Barney LLC (Morgan Stanley) and later Wells Fargo Advisors, LLC (Wells Fargo), circumvented Wells Fargo’s policies and procedures by assisting another broker in concealing nearly $400,000 in loans to three firm customers, loaned $25,000 to a customer without permission, participated in an undisclosed private securities transaction, otherwise referred to in the industry as “selling away”, where eight customers invested more than $3 million, and provided false information to Morgan Stanley on two separate questionnaires.

King entered the securities industry in 1999. From 2006, until June 2009, King was registered with Citigroup Global Markets Inc. (Citigroup). From June 2009, until October 2010, King was associated with Morgan Stanley. Thereafter, from October 2011, until May 2015, King was associated with brokerage firm Wells Fargo. On April 27, 2015, Wells Fargo filed a notice of Termination Form U-5 on the same day that FINRA entered into its agreement with King in which King accepted a fine and sanctions stating that King was discharged from the firm because of the settlement with FINRA which included an 18 month suspension. Thereafter, FINRA filed a second regulatory action stating that King failed to pay the $35,000 required as part of the settlement as of July 28, 2015.

FINRA alleged that in 2009, King and his partner referred to by the initials “AP”, formed PKG, a d/b/a branch office located in Florida registered through Morgan Stanley and then Wells Fargo. PKG allegedly provided financial “concierge” services to professional athletes who played in the NFL and the NBA. FINRA alleged that King committed the violations contained in the complaint for the supposed benefit, of several of these athletes.

FINRA found that from November 2011, through January 2012, while King was registered with Wells Fargo, King assisted his partner in loaning approximately $399,500 to three professional athletes in the NFL and NBA. In order to conceal the loans from Wells Fargo, FINRA alleged that AP wired the loan funds first to an entity referred to as “BPKG”, an entity owned by King’s and AP’s family members. FINRA alleged that King controlled the finances of BPKG and could effect transfers of funds from the account. FINRA alleged that King, at AP’s direction, wired the loan funds from BPKG to the customers. FINRA found that King understood that AP transferred the loan funds through BPKG in order to avoid Wells Fargo’s reporting requirements.

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Mark Kaplan (Kaplan) has been the subject of at least four customer complaints and one termination. The customer complaints against Kaplan allege a number of securities law violations including that the broker made unsuitable investments, churning (excessive trading), unauthorized trading, breach of fiduciary duty, misrepresentations and false statements, among other claims

Kaplan entered the securities industry in 1989. From September 2005, until June 2009, Kaplan was registered with Citigroup Global Markets Inc. (Citigroup). From June 2009, until April 2011, Kaplan was associated with Morgan Stanley Smith Barney (Morgan Stanley). In March 2011, Morgan Stanley filed a notice of Termination Form U-5 stating that Kaplan was discharged because of a customer complaint that was made against Kaplan. The firm also stated that it had other concerns regarding activity in client accounts. In response, Kaplan stated that the allegations by Morgan Stanley were unfounded and that the firm had approved all of the activity in client accounts. Since March 2011, Kaplan has been associated with Vanderbilt Securities, LLC.

All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. Many of the claims against Kaplan involving claims of churning and excessive trading. When brokers engage in churning the investment trading activity in the client’s account serves no reasonable purpose for the investor and is transacted to profit the broker through the generation of commission payments. The elements to establish a churning claim, which is considered a species of securities fraud, are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker David Honingstock (Honingstock) has been the subject of at least two customer complaints, two financial disclosures, and three judgments and/or liens. The customer complaints against Honingstock allege a number of securities law violations including that the broker made unsuitable investments, breach of fiduciary duty, misrepresentations and false statements, among other claims

In addition to these claims, Honingstock declared bankruptcy in October 2014 in New York. In addition, Honingstock former brokerage firm, Morgan Stanley, initiated an action against the broker alleging a debt of $1,635,123 owed to the firm that in a compromise settlement was reduced to $218,000. Honingstock has several other debts listed on his disclosures including a hospital bill from 2013, and a New York State Tax lien for over $17,000. A broker’s inability to manage his own finances or having trouble making ends meet may suffer from potential conflicts of interests in making recommendations to his clients.

Honingstock entered the securities industry in 1986. From January 2003, until May 2007, Honingstock was registered with UBS Financial Services, Inc. (UBS). Upon leaving from UBS, from May 2007, through June 2009, Honingstock was associated with Citigroup Global Markets Inc. (Citigroup). From there, Honingstock was associated with Morgan Stanley Smith Barney form June 2009, until December 2009. Finally, Honingstock has been registered with Citigroup since 2013.

Advisers have an obligation to deal fairly with investors and that obligation includes making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its costs, benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.